Boards should disclose their climate “competencies” and appoint a special committee made up of the most senior executives to ensure best practice in climate transitioning, according to a leading expert.

Chief risk officers should also have a “permanent seat” in the boardroom to help guide organisations through their transition and deal with potential threats and opportunities from climate change.

The views come in a paper, by leading climate adviser Tina Mavraki, published by the Institute of Directors. Mavraki is a strategic climate adviser, a non-executive director, and a member of the IoD’s sustainability task force.

“The key to climate transition is the tone and sponsorship at the top. Resolve and a genuine commitment to steering and monitoring are key enablers for climate transition success.”

Mavraki’s paper comes as the US turns away from ESG and sustainability issues, such as diversity and inclusion policies, under Donald Trump’s second presidency. The White House turnabout has raised questions for sustainability and ESG elsewhere in the world, with some UK businesses already reporting a knock-on effect among their US clients.

Mavraki’s paper for the IoD’s Governance Centre focuses mainly on the response of banks to climate change but the recommendations have application in other industries.

Triple defence

Advice centres on the classic “three lines of defence” for risk management.

The proposals for a special climate committee form the basis for the first boardroom-level line of defence. The second line is that climate becomes “fully integrated” into risk and compliance frameworks “thus creating a unified internal control environment”.

The third line is, as always, internal audit and this should “define an extensive auditable domain” for climate “akin to that of the financial domain”.

Culture also figures heavily in Mavraki’s advice, with a nod to the adage that “Culture does eat strategy for breakfast.”

“Consequently, an organisation can make conscious decisions to invest and track its cultural performance to make it climate-fit,” she writes.

Policymakers’ efforts on sustainability have mainly focused on corporate disclosures. Many UK companies already report using the Task Force on Climate-Related Financial Disclosures (TCFD) climate-reporting framework.

International standards

Late last year, officials gave their approval for the introduction of new reporting regulations, IFRS S1 and S2, from the International Sustainability Standards Board, a sister body to the organisations that set International Financial Reporting Standards (IFRS).

Climate reporting suffered a body blow in the US in January when it became clear that watchdogs at the US Securities and Exchange Commission would no longer pursue the introduction of mandatory climate risk reporting rules for Wall Street companies.

Sustainability reporting has also become controversial in Europe. Last week, the European Commission announced it would postpone implementation of its big non-financial reporting programme (made up of the CSRD and CSDDD), as well as water down many of its key features.

US politicians have also attacked European measures as an example of regulation that “puts America last.”

Policy measures on climate are becoming increasingly fraught as geopolitics polarises. Considered governance advice is needed now more than ever.